2014 (7) TMI 1008 - AT - Service Tax

Valuation - Management, maintenance or repairs - Inclusion of the value of material and consumables for the purpose of discharging the liability under the Service Tax - Notification 12/2003-ST - appellants were clearing the goods under a consolidated invoice and uniformly taking 80% of the value of material and consumables and 20% towards the service. - The appellants contention is that the material and consumables were sold on payment of appropriate VAT hence the value of material and consumables are not to be taken into consideration for the purpose of service tax - Held that - as per the provisions of the above Notification, there is a condition that there should be documentary proof specifically indicating the value of goods and material sold - There is no separate invoice regarding the sale of goods and material - The materials used for repair cannot be considered as spare parts, therefore the ratio of the above decision is not applicable on the facts of the present case. - Decision in the case of Wipro GE Medical System Pvt. Ltd (2008 (8) TMI 207 - CESTAT, BANGALORE) distinguished. The activity undertaken by the appellants is more akin to the activity under consideration in the case of Safety Retreading Co. (2012 (6) TMI 719 - CESTAT, CHENNAI (THIRD MEMBER)), therefore the ratio of the above decision is fully applicable on the facts of the present case - no merit in the contention of the appellants that the value of material is not to be taken into consideration for purpose of service tax. - Decided against the assessee. Extended period of limitation - Held that - demand is for the period July 2003 to March 2008 and the show cause notice was issued on 7.10.2008 alleging suppression with intent to evade payment of tax. - in response to queries raised by the Revenue vide letter dated 25.10.2005, the appellants explained their position regarding payment of service tax. - audit raised an objection on 16.12.2006 - the allegation of suppression with intent to evade payment of tax is not sustainable. - the demand beyond the normal period of limitation is not sustainable and set aside. - penalties also waived - Decided partly in favour of assessee.

Summary

Issues:
1. Interpretation of Notification No. 12/2003-ST regarding service tax liability on maintenance and repair services.
2. Consideration of value of material and consumables in service tax calculation.
3. Time limitation for demand of service tax.
4. Allegation of suppression with intent to evade payment of tax.
5. Imposition of penalties.

Interpretation of Notification No. 12/2003-ST:
The appellants contended that they are entitled to exemption under Notification No. 12/2003-ST as they separately recorded the cost of material and consumables, claiming that the value of material sold is exempt from service tax. They relied on a Tribunal decision supporting this argument. However, the Revenue argued that the service provided is a composite contract, citing a different Tribunal decision. The Tribunal analyzed the activities undertaken by the appellants and concluded that the value of material and consumables should be considered for service tax calculation as per the Notification's condition requiring documentary proof of the value of goods sold.

Consideration of Value of Material and Consumables:
The appellants maintained that the major portion of the demand was time-barred, as they had disclosed their payment structure to the Revenue in 2005 and 2006. The audit report highlighted discrepancies, leading to a demand for payment. The Tribunal found that the appellants had not concealed any material facts, and the demand beyond the normal limitation period was not sustainable, thereby setting it aside.

Time Limitation for Demand of Service Tax:
Regarding the allegation of suppression with intent to evade payment of tax, the Tribunal noted that the appellants had responded to Revenue queries promptly and had paid the demanded amount after audit objections. The Tribunal found that there was no intent to evade payment, leading to the dismissal of penalties imposed.

Allegation of Suppression with Intent to Evade Payment of Tax:
The Tribunal dismissed the Revenue's argument that the value of material should not be considered for service tax calculation. The activities undertaken by the appellants were distinguished from the case cited by the Revenue, supporting the inclusion of material value. The Tribunal found no merit in the appellants' contention and upheld the demand for service tax.

Imposition of Penalties:
As the Tribunal found no intent to evade payment of tax and noted the appellants' cooperation with the Revenue during audits, it deemed the case unsuitable for penalty imposition. Therefore, the penalties imposed were set aside, and the appeal was disposed of accordingly.